Brokers' call on Fortis Healthcare and TCS

Citigroup has recommended a 'Buy' on Fortis Healthcare with a target price of Rs 155. Fortis looks well-placed to gain from the growing market for healthcare delivery services in India over the longer term.

"We expect growth to remain strong on the back of its aggressive expansion plan and faster turnaround of newer hospitals. On the other hand, we are cautious on its overseas strategy and its possible impact on balance sheet and return ratios — likely to weigh on valuations" said Citigroup in a note to client.

The hospital companies in Asia have a predictable and steady revenue stream, given high unmet demand and low but growing penetration of organized healthcare. Given that Fortis is still in an investment phase and its recent transition to an asset light model that involves high rentals/fees to RHT.

Citigroup value Fortis' hospitals business at 14x FY14E EBIDTAR - c5% discount to Apollo Hospitals, given the latter's pure India focus — arriving at a value of Rs 135/share for its hospitals business.

Deutsche retains buy on TCS

Deutsche Bank has retained its top 'Buy' on Tata Consultancy with a target price of Rs 1,550 and raised their FY13E rupee revenue forecast by 2.7% primarily on account of change in rupee/dollar assumption to Rs 54.47.

In line with management's expectation at the beginning of the year, growth in 2HFY13 looks likely to be slower than 1HFY13. While there has been no change in the demand outlook for FY13, revenue growth for 3QFY13 should will be weak on account of lesser working days and expected furloughs in the hi-tech, manufacturing, telecom and a few financial services customers.

"We expect TCS to deliver a 3% qoq dollar revenue growth in 3QFY13 and a 14%yoy dollar revenue growth for FY13," said Deutsche Bank in a note to client.